be HSato 7/18/13 Two courtesy photos "Solar Credit 1" and "Solar Credit 2" in NewsEdit.
By Hiroko Sato
Alternative-energy critics who don't believe government can boost demand for solar power without spending big money might find it difficult to argue against Massachusetts' success in doing just that.
From some parcels on Chase Road and Pleasant Street in Lunenburg to the land that the town of Shirley owns on Walker Street, empty lots across the region wait to be filled with hundreds of solar panels as a solar-farm construction boom continues.
Solar developers would tell you the trend stems from "Solar Carve Out," a state program that created a market for panel owners to sell off solar renewable-energy credits, or SRECs, just like stock shares, and make money.
But Dan Berwick, director of policy and business development for Borrego Solar Systems, doesn't know how many future projects will be lined up for the company to work on. That's because the popularity of Solar Carve Out has boosted statewide solar capacity past 400 megawatts -- a key point at which Solar Carve Out is set to discontinue.
With the SREC program coming to an end, developers aren't making plans for more solar farms until the state announces new regulations to replace Solar Carve Out and show what's in it for solar investors. The longer the state waits to finalize new regulations, the fewer projects there will be in the pipeline for companies like Borrego, which designs and installs commercial solar systems from several offices nationwide, including one in Lowell, Berwick said.
Berwick's concern is real, said Richard Chase, owner of Chase Systems, a Princeton consulting firm that helps develop solar-energy production facilities. The state Department of Energy Resources has made public some of the ideas it has for a second solar program to seek feedback on them. But no one knows exactly what the final regulations will say.
"That put me in an awkward position," Chase said of his hesitation to work on new solar-farm projects. "I have a number of potential projects that (make me ask myself), 'What do I do?'"
Under the Solar Carve Out program, electric suppliers such as National Grid and NStar must provide a certain percentage of power in the state from solar energy or buy SRECs to make up for it. Solar-panel owners receive one SREC for every 1,000 kilowatt-hours generated and can sell the credits to companies needing them. This prompted developers to construct solar farms to rake in revenue from sales of SRECs, which were traded at as much as $570 each in May 2011.
The Department of Energy Resources had said it would only issue SRECs for solar facilities built before the statewide capacity reached 400 megawatts. With the popularity of SRECs, the capacity surged from 77 megawatts at the beginning of 2012 to 250 megawatts in April 2013, and many developers realized how quickly it could reach 400 megawatts at the last minute. By late May, the DOER had enough many applications to bring up the capacity to 550 MW.
This added to the developers' confusion about their potential revenue. The value of SRECs had begun tumbling last September because there were too many solar farms built and too many SRECs floating in the open market. SRECs hit an all-time low of $181.50 on April 13, putting additional brakes on the solar development furor.
In early June, the state announced the emergency regulations that extend the Solar Carve Out through the end of the year for residential and other less-than-100kw projects as well as some large projects that are in progress. The extension also applies to community solar projects developed under Massachusetts Clean Energy Center programs, such as the 276 kw Harvard Solar Garden in which more than 40 local families and entities have a stake. The logic is that individual shares of such projects are less than 100kw each, said Worth Robbins, one of Harvard residents leading the initiative.
However, projects that did not have executed agreements with electric distributors, such as National Grid and NStar, to interconnect their systems as of June 7 are now shut out of the SREC program.
Robert Babcock, managing member of Maryland-based EPG Solar, said the 1 MW and 3 MW solar farms that the company is developing on Pleasant Street in Lunenburg and on Walker Street in Shirley, respectively, will be completed by the Dec. 31 deadline to qualify for SRECs under the emergency regulations. Some of his other projects elsewhere in Massachusetts cannot move forward, however, because they didn't have the interconnection service agreements before June 7.
"There will be many people who are in the same position as I am," Babcock said.
The 3.1 MW solar farm that NuGen Capital Management plans to construct at 651 Chase Road in Lunenburg will also qualify for SRECs, according to the New York-based company's CEO David Milner. However, he also has some projects to be developed after the new regulations are finalized, which may not be until the beginning of next year.
"You are not making firm commitment" to any project until then, Milner said of the general sentiment among solar developers. "You have to wait and see more details in the second program and (you know) how you want to proceed."
Experts say local banks don't grant loans for solar farm projects because they are considered risky investments.
"People who are financing these projects come down to wealthy individuals and Wall Street," Chase said.
Without a clear vision of how a project can be profitable, developers could not present their potential projects to their investors.
"Some people are pushing ahead, saying, 'Whatever it is, it will be good,'" Babcock said of the yet-to-be-announced regulations. But, most developers want to wait.
Berwick said emergency regulations clarified some confusion about which projects will qualify for SRECs. Experts say, however, the regulations left a bad taste in some developers' mouths. As people had grown aware that the SREC program would end soon, they began rushing in applications for projects to reserve their space in the program. Some of them just aren't viable, Berwick said.
"A significant portion of it won't be built and won't work," Chase said. And, well thought-out projects are blocked from the SREC program.
Chase has turned away some legitimate potential projects because there are no more slots under Carve Out.
"It hurts that we have to walk away from it," Chase said.
Carrie Cullen Hitt, senior vice president of state affairs for Solar Energy Industries Association, said the state's revised goal of 1,600 MW for the statewide solar capacity has sent the industry a positive message. The lag between the achievement of the 400 MW cap and the announcement of new regulations should not result in a major gap in project developments, she said.
Berwick said how big the gap will be, depends on how quickly DOER finalizes the new regulations.